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Law Reform: Investment Advisers
A Discussion Paper

CHAPTER 7 DEFINITIONS

7.1	There are a number of matters relating to definitions in the Act that we would like comments on.

Definitions

7.2

If increased emphasis is placed on disclosure, more situations are likely to be caught by the Investment Advisers (Disclosure) Act 1996. Therefore it is important that its definitions are clear. We have noted some issues relating to definitions below. We will be interested to receive comments from people who use the legislation as to whether they think there are other words and definitions in the Act that could be clarified.

"Investor"

7.3

There may be a chicken and egg problem with the definition of investor and the current section 3. "Investor" means "a member of the public to whom investment advice is given or on whose behalf investment money or investment property is held by an investment adviser or an investment broker". Section 3 requires an investment adviser to provide initial disclosure to the investor before giving the investment advice or receiving the investment money or the investment property. Will the definition of investor, with increased emphasis on initial disclosure, become a problematic circular definition?

7.4

Would it be better to state that initial disclosure must be made to any "member of the public" before investment advice is given or before investment money or investment property of the member of the public is held by the investment adviser?

"Investment Adviser"

Computer Software

7.5	Does the definition of investment adviser need to be altered to cover distributors of investment advisory computer software?

"Relationship"

7.6

Section 4(1)(a) of the Investment Advisers (Disclosure) Act states that second tier request disclosure must include "the name of any relevant organisation" with which the adviser has a relationship and a description of that "relationship". We are informed that there are difficulties in interpreting the word "relationship". Does the term lend itself to definition? Should a definition be provided for "relationship"?